Ryanair warning on profits growth

Wednesday, 05 Jun, 2007 0

Profit growth at no-frills carrier Ryanair is to slow dramatically in a period of “soft” market conditions.

The Irish budget carrier said net profit growth of 33% to a record 401.4 million euros (£272 million) would decline to growth of 5% in the current financial year, despite forecasts of increased carryings.

The airline expects passenger numbers to continue to rise. Ryanair saw numbers rise by 22% to 42.5 million in the year ending March and forecasts carryings to increase to more than 52 million in the coming 12 months as it adds 30 new aircraft.

CEO Michael O’Leary said: “If market conditions continue to be soft, as is presently the case, then this ambitious traffic growth can only be delivered by discounting fares and reducing yields.

“This remains a highly volatile and cyclical business, but over time the price leaders such as Southwest in the US and Ryanair in Europe have repeatedly demonstrated that during periods of adverse trading conditions, the lowest fare and lowest cost carrier makes the greatest gains.”

The growing importance of ancillary revenues was demonstrated in the annual results. These grew by 40% and are expected to rise at a faster rate than scheduled traffic, according to O’Leary.

Higher passenger spend, increased penetration and the growth in excess baggage revenues helped boost ancillary revenues, and are expected to be assisted by Expedia becoming the airline’s online hotel provider.

O’Leary used his annual results statement to repeat attacks on increased airport charges at Stansted and Dublin airports and the doubling of UK Air Passenger Duty which he blamed for a negative impact on traffic and yields.

by Phil Davies

Phil Davies

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